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Maharashtra govt's huge package for flood-hit Marathwada is totally unviable

Ashwin Aghor | Updated on: 6 October 2016, 16:01 IST

After several years of drought, the Marathwada region of Maharashtra has been ravaged by severe flooding owing to incessant rains over the last fortnight.

The floods have caused severe financial losses to farmers, to the tune of several crore rupees. The farmers and Opposition parties have been demanding compensation and a relief package for the region, given the natural calamity.

Also read- No respite: after 5 years of acute drought, Marathwada reels under flood

Bowing to the pressure, Chief Minister Devendra Fadnavis announced unprecedented projects for the region, collectively worth Rs 49,248 crore.

However, given the financial state of Maharashtra, this seems nothing more than an inflated promise.

The cabinet meeting

Breaking the tradition of holding cabinet meetings only at Mantralaya in Mumbai, the Bharatiya Janata Party-led Maharashtra government held the cabinet meeting to take these decisions in Aurangabad, the heart of Marathwada.

The government's Rs 49,248 crore package includes:

  • Rs 9,291 crore for irrigation

  • Rs 30,000 crore for roads

  • Rs 5,326 crore for railways

  • Rs 250 crore for airports

  • Rs 1,885 crore for agriculture and water conservation

  • Rs 725 crore for education.

Under the irrigation head, the following projects have been announced:

  • Krishna Marathwada project, for the irrigation of 33,945 hectares of land in 288 villages (Rs 4,800 crore)

  • Lower Dudhana project, for the irrigation of 34,438 hectares of land in Jalna and Parbhani districts (Rs 840 crore)

  • Nandur Madhmeshwar project for the irrigation of 45,576 hectares of land in Aurangabad, Nashik and Ahmednagar districts (Rs 894 crore)

In addition, the Aurangabad smart city project has been allocated Rs 1,000 crore.

Financially unviable

Interestingly, the state government lacks the financial strength to implement the projects announced for Marathwada.

With a total financial burden of Rs 3.80 lakh crore, the state is in no position to draw funds to execute the projects.

"There is no viable financial model in Maharashtra to execute the projects. At a total debt of over Rs 3 lakh crore, one cannot be sure of even beginning these projects, let alone their execution and completion," says Sunil Joshi, a finance and investment expert from Mumbai.

The total debt burden of Maharashtra has increased by around 124% in the last eight years. In the fiscal year 2007-08, the figure was Rs 1.42 lakh crore, which has almost tripled.

"The state will have to bear another Rs 31,000 crore to service this debt. It is quite worrisome when the state has to spend almost 60% of its revenue on salaries and pensions, which add up to nearly Rs 1.17 lakh crore. This is very high compared to the salary and pension bills of 50.88% of the revenue in the fiscal year 2007-08," Joshi said.

Maharashtra's debt burden has increased from 1.42 lakh crore in 2007-08 to Rs 3.80 lakh crore

However, the advisers to the Chief Minister feel the otherwise. One of these advisers, on the condition of anonymity, said: "Whenever such projects are announced, the financial provisions for them are made in the budget. The proposals for supplementary provisions for these projects will be put up to the finance ministry."

The adviser said that funds for the projects could be raised from various sources, adding: "More than funds, political will power is needed to execute the projects. The proposed Mumbai-Nagpur Communication Expressway is the example of it. There are various sources from where government can raise funds."

But he could not give satisfactory replies to a query on how the additional loan would be serviced, with such a huge financial burden already on the state.

Even the 150% growth in revenue generation over the last eight years could not salvage the state, because revenue expenditure has grown by 220% over the same period.

"As a result, the state is not in a position to reap the benefits of increased revenue. One should keep in mind that the state budget is in deficit of around Rs 9,290 crore," Joshi said.

Bleak outlook

In this situation, Joshi feels the projects announced for Marathwada cannot be executed. "In an ideal condition, the plan size should be, at most, 24% of the total debt burden of the state. This is the ideal ratio for sustained service of the loan. In the case of Maharashtra, this benchmark has been crossed long ago. Now the state has no option but to borrow money if it has to execute the projects announced in Marathwada," Joshi said.

The state government has already spent huge funds on non-viable infrastructure projects like the Mumbai Monorail. This project has become a white elephant, with daily losses to the tune of Rs 3 lakh.

The government has exhausted all possible funding avenues, including the World Bank, the International Monetary Fund, and even countries like Japan. Now there is no door left to knock on.

Sachin Savant, spokesperson for the Maharashtra Pradesh Congress Committee, said: "The project cost announced by the government is unviable. The figures are extravagant. The entire cabinet should be subjected to a lie detector test. The government is misleading people of the state by throwing heavy figures at them, just like it had earlier cheated the innocent farmers in the name of restructuring of loans.

"The announcement is nothing but rubbing salt on the wounds of the people in Marathwada. The government has tricked the people by including some old and Central government projects in the list."

Edited by Shreyas Sharma

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First published: 6 October 2016, 16:01 IST